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Sonoma County, California Drops Taxes by Nearly Half in Bid to Save Cannabis Farmers

California’s cannabis farmers are suffering from high taxes. But Sonoma County farmers can take some relief by cutting cultivation taxes almost in half.

A March 17 press release by the County of Sonoma Board of Supervisors revealed that they had recently agreed to amend and reduce the Cannabis Business Tax ordinance’s fiscal year 2021-2022 cannabis cultivation taxes rates. The reduction will be effective from June 30, 2023 to 45%. 

The reduced rates will be applied retroactively—going back to July 1, 2021, with the goal to ease financial hardship for local cannabis operators. 

However, the revenue lost due to tax cuts will be offset with a projected and current surplus of county cannabis tax revenues that exceeds program operational costs. Taxes collected in fiscal year 2020-2021 from 183 cannabis operators totaled $3,634,230—compared to $2 million in estimated annual operating costs.

Staff from the county will present an amendment ordinance to reflect the temporary tax decrease on April 5. They also plan to extend the April 31 and April 30, due dates to May 31, for payments of cultivation tax. The original due date for all taxes on cannabis was extended to April 30, from January 31, 2013.

“We were putting people out of business with our policy, so this is the right thing to do,” said District 4 Supervisor James Gore, Chair of the Board of Supervisors. “The reduced cultivation tax rates are needed to account for changes in the market and our Board’s policy direction. As we move to a different tax structure and policy framework, the revenue surplus from our cannabis program will be used for operational expenses for two years. We’re committed to getting this issue right for Sonoma County, and that means continuing to work between neighborhoods and industry advocates, learning from other counties, and finding local solutions that are fair and sustainable for both communities and the environment.” 

The Press-Democrat reports that there are 171 farmers that fall under the county’s jurisdiction, and they are taxed at different rates on a per-square-foot basis for outdoor, indoor and mixed-light crops.

The National Cannabis Industry Association conducted a survey among 396 U.S. marijuana growers and found that only 37% were financially successful.

On January 1, California Department of Tax and Fee Administration’s tax hike on dry-weight flower took effect—ushering in the latest blow to cultivators. Rates rose almost five percent to $161 per pound. Leaders in the cannabis industry rallied at the Capitol to try to save their industry. After releasing a state budget proposal for the 2022-2023 fiscal year, Governor Gavin Newsom acknowledged that regulatory changes are needed to sustain California’s legal cannabis industry while curbing the illicit market.

These changes were made in response to public complaints about the burden of state taxes on the cannabis industry. Senate Bill 1074 would eliminate the state cannabis cultivation tax, and raise the state cannabis excise taxes. The Board supports state cannabis tax reform. The Board predicated its support for both efforts on the state’s ability to maintain state tax revenue funding for children’s programs.

Tax relief wasn’t the only item on the agenda. Also approved by the Board of Supervisors was a resolution of intention for the adoption of a cannabis program framework. This framework is built on 16 core principles to guide preparation of General Plan amendments, and Environmental Impact Report to be updated the Cannabis Land Use Ordinance. 

The Board instructed staff on June 8 to update the cannabis program in accordance with community feedback. Eight public workshops have already been held, twelve small-group outreach sessions have taken place, and there has also been a survey conducted across the entire county.